Waiving agricultural loans could cost 2% of GDP: CEA

‘CHALLENGE TO FISCAL CONSOLIDATION’

CHIEF ECONOMIC Advisor Arvind Subramanian has expressed concern over the recent waiving of farmers’ loans by state governments, saying it could increase the deficit by 2 per cent of the GDP if the practice is carried out nationwide.

“We’ve had a spate of announcements recently about agricultural loans being waived off. You know these could cost, if it were to spread, these could cost something like 2 per cent of GDP, adding to the deficit,” Subramanian said last week.

“If these things spreads as is possible. So I think that’s a kind of big challenge,” he said in an apparent disagreement of the recent move by Uttar Pradesh chief minister Yogi Adityanath to waive agricultural loans worth Rs 36,000 crore in the state.

At the Peterson Institute here last week, Subramanian said actions like these pose a big challenge to the Centre’s effort towards fiscal consolidation. If the Centre achieves success, the state undoes that, he rued.

The government is grappling with the challenge of how to waive the debt of the private sector, which is a political issue now, he said. “There are lots of discussionsonhowtodealwiththis.but I think at the heart of the difficulty is it’s very simple. How does a political system in which concerns about you know cronyism, crony capitalism are so strong? How does that system, how is it able to forgive — is the public sector tax payer on the hook and forgive private sector debts.

“I think that’s the heart of the political problem and we are still kind of grappling with how to do that,” Subramanian said.

Talking about GST, he said it is a major development in India.

“It’s the most ambitious tax reform. It is something that is simply inconceivable in the United States. It’s just simply inconceivable, not just because it’s a value added tax which you know people here on the left and right hate, but also because it’s actually a tax that has to be coordinated between the Centre and the states,” he asserted.

Noting that the GST will bring a uniform taxation system across the country, Subramanian said the benefits are going to be quite substantial. Washington: Any “serious actions” taken by the Trump Administration on the H-1B visa programme would be a cause of “worry” as a majority of Indian exports in the services sector go to the US, chief economic advisor Arvind Subramanian has said. “If there are serious actions taken it’s something that’s going to worry us a lot because, remember that our exports of services are about 40 to 45 per cent of the total exports,” Subramanian said. PTI